Tuesday, May 17, 2016

Spotlight Continues To Burn On Predatory Land Contract/Contract For Deed Real Estate Rackets; Arrangements "Are To Housing What Payday Loans Are To Banking & Rent-A-Centers Are To Furniture!"

From The Washington Post's Wonkblog:
  • Beryl Satter knew something like this was bound to happen. Or, rather, to happen again.

    The Rutgers historian wrote the book on an obscure form of predatory lending from the mid-20th century that victimized black home buyers when banks would not lend them mortgages.

    Her book, "Family Properties," came out in 2009,(1) on the heels of the housing crash. And as she traveled the country talking about it — about families defrauded from the homes they thought they owned, about sellers who promised home ownership but collected deposits and evictions instead — people kept approaching her.

    "Pretty much everywhere I go, people say 'I’ve been hearing about this,'" Satter says. "Contract" lending is making a comeback.

    In this model, buyers shut out from conventional lending are offered an alternative: They can make monthly payments on a home directly to the seller, instead of a bank, with the promise of receiving the deed only once the property is entirely paid off, 20 or 30 years down the road. In the meantime, they have few of the legal protections of a typical home buyer but all of the responsibilities of one. They don't build equity with time. They can be easily evicted. And if that happens, they lose all of their investment.
    What is particularly alarming about the trend, though, is that we've seen it before. In its earlier incarnation, it was an explicitly racist form of exploitation. And now it is victimizing the same groups again: mostly lower income and minority home buyers who can't access traditional credit.

    "There’s nothing new here in the slightest," Satter says. "This is just a continuation of the same old game. That’s what’s so disturbing."
    "When the banks close down, people still need to buy," Satter says. And so they find a way. Just as creative investors find a way to meet their demand. Land contracts are to housing what payday loans are to banking and Rent-A-Centers are to furniture. What people in need can't access through credit someone is always willing to provide — for a price.
For more, see Why a housing scheme founded in racism is making a resurgence today.
(1) See generally:
  •  In Chicago, Real Estate and Race as a Volatile Mix,
  • You Tube Video: Book TV: Beryl Satter "Family Properties" (describes the process known as "contract selling," where landlords in post-World War II Chicago would sell African-Americans overpriced homes and retain the homes title while charging exorbitant interest rates. Upon default of the loan the home's owners would be evicted and the process would start anew with another family.). contract for deed